# Incentives for compounding staking rewards **URL:** \ **Category:** Tech Talk\ **Created:** [September 11, 2026, 10:17am UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632 "2026-09-11T10:17:20Z")\ **Posts on this page:** 14\ **Page:** 1
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 11, 2026, 10:17am UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/1 "2026-09-11T10:17:20Z")
I’d like to use the invitation as an opportunity to start a discussion and raise the question again: **Would it be possible to introduce incentives for compounding staking rewards within Polkadot’s staking model?** The underlying goal would be to reduce selling pressure by creating a meaningful economic incentive for participants to keep their staking rewards compounded rather than realizing and selling them. One possible implementation could be a progressive reward multiplier. The longer rewards remain compounded, the higher the effective reward rate could become. Once DOT leaves the staking account—for example, when rewards are claimed for non-compounding purposes—the multiplier would reset to its minimum level and the mechanism would start over. An important question would be whether such an incentive should apply only to nominators or to validators as well. As I understand it, nominators and validators currently receive rewards through different mechanisms, particularly since direct validator commissions have been removed. Nevertheless, I believe applying the incentive to both sides would be preferable if technically and economically feasible. This would create a more balanced and fair incentive structure across the staking ecosystem. I think a change like this could have an impact beyond simply modifying the nominal staking yield. If the incentives were strong enough to be clearly noticeable, they could potentially reduce sell pressure by encouraging participants to compound their rewards. At the same time, there could be a psychological effect. DOT is unfortunately still often perceived as an asset that should be moved into “safer” assets as quickly as possible. A staking mechanism that visibly rewards long-term compounding could help shift this perception and create stronger incentives for participants to think of DOT as an asset worth accumulating and holding rather than immediately selling. In my view, this could therefore be an interesting way to use the staking system not only to secure the network, but also to influence long-term economic behavior within the ecosystem. > ---
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 11, 2026, 10:43am UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/2 "2026-09-11T10:43:24Z")
I’m aware of the obvious first question or objection that naturally follows from this idea: **“Staking rewards are taxable events in most countries.”** I don’t think this is necessarily a critical issue, though. **1.** First of all, participants would still be free not to use such a mechanism in the first place. **2.** There could also be ways to compound a predefined percentage of the rewards while having the remaining portion paid out to cover the resulting tax liability and other costs. In that case, the incentives would simply apply proportionally to the amount being compounded. **3.** In principle, there is also the option of paying any resulting taxes from sources other than selling the staking rewards. Of course, that assumes that participants consider DOT an asset worth holding rather than something they want to sell as soon as they receive it. ---
**Author:** ![Leemo](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/leemo/32/8059_2.png) [@Leemo](https://forum.polkadot.network/u/Leemo)\ **Post date:** [September 11, 2026, 12:56pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/3 "2026-09-11T12:56:37Z")
> **[\[Whitelisted Caller\] Change Polkadot AH and PC Network Suffix](https://polkadot.subsquare.io/referenda/1945)** > > \[PR1233\](https://github.com/polkadot-fellows/runtimes/pull/1... _“dotUSD is the instrument which makes dollar-denominated budgeting possible on-chain. Under the second phase of the DAP, **validators and nominators are to be remunerated in stables** ; the Treasury is to receive a mix of stables and DOT. Without a native, decentralized, DOT-backed stablecoin, these operations would necessarily depend upon externally issued instruments with all the counterparty risk and governance dependency that entails. dotUSD closes this gap: it allows the network to denominate its obligations in dollars, disburse them in a native asset and retain full sovereignty over the process from issuance to settlement.”_ “ **validators and nominators are to be remunerated in stables** ” ---
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 11, 2026, 1:20pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/4 "2026-09-11T13:20:42Z")
Oh. I wasn’t aware of that. That means the selling pressure resulting from the staking system is effectively built-in from the very start. Is that really desirable? To my mind, that’s a step in the wrong direction. ---
**Author:** ![Leemo](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/leemo/32/8059_2.png) [@Leemo](https://forum.polkadot.network/u/Leemo)\ **Post date:** [September 11, 2026, 2:00pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/6 "2026-09-11T14:00:27Z")
Then you should vote NAY on the referendum and propose an alternative. ---
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 11, 2026, 2:46pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/7 "2026-09-11T14:46:09Z")
I’m missing a few million DOT for that. Has there already been any discussion about what the rewards in stablecoins would look like? Would the staking rewards be a fixed amount, regardless of the current DOT/USD price? While that would come with certain downsides, it could also offer advantages, as selling pressure would decrease in relative terms when prices rise. Naturally, the reverse dynamic applies as well. ---
**Author:** ![LuckyLuciano](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/luckyluciano/32/9789_2.png) [@LuckyLuciano](https://forum.polkadot.network/u/LuckyLuciano)\ **Post date:** [September 14, 2026, 10:17pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/8 "2026-09-14T22:17:50Z")
I Support this idea 💯 ---
**Author:** ![ThomasR](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/thomasr/32/1227_2.png) [@ThomasR](https://forum.polkadot.network/u/ThomasR)\ **Post date:** [September 17, 2026, 12:04pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/9 "2026-09-17T12:04:48Z")
> [@coco](#): > > Would the staking rewards be a fixed amount, regardless of the current DOT/USD price? It’s going to be paid in stablecoins, so yeah 1 dotUSD = 1 USD. Whatever the DOT/USD price. ---
**Author:** ![ThomasR](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/thomasr/32/1227_2.png) [@ThomasR](https://forum.polkadot.network/u/ThomasR)\ **Post date:** [September 17, 2026, 12:06pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/10 "2026-09-17T12:06:08Z")
As replied under coco’s tweet. If you want auto-compounding, use vDOT ! I don’t think there’s a need to develop for millions something that already exists 😅. And for taxation purposes, it’s easier to have vDOT. It’s the same story that: stETH or wstETH (LIDO LSTs) - stETH is a rebase mechanism, so it pays each reward by creating new stETH → probably a taxable event vs - wstETH is compounding mechanism, it’s only the ratio that changes, but the wstETH qty remains the same over time. You only have a taxable event when you sell some wstETH to cash out. 👉 Same for vDOT (comparable to wstETH). NB: im’ not a pro of taxation, it’s different in every country. ---
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 17, 2026, 2:49pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/11 "2026-09-17T14:49:40Z")
Lol. But would you get the same amount of dotUSD with every era, regardless of the DOT/USD price? ---
**Author:** ![ThomasR](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/thomasr/32/1227_2.png) [@ThomasR](https://forum.polkadot.network/u/ThomasR)\ **Post date:** [September 17, 2026, 7:45pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/12 "2026-09-17T19:45:13Z")
You should rewind Gav’s speech at Web3Summit in 2025. “Fixed fiat rewards for validators” ![Capture d’écran 2026-09-17 à 21.44.16](https://europe1.discourse-cdn.com/flex005/uploads/polkadot2/original/2X/1/12ba8d0c6e761a88f81cd57fbd4641cc755d78e7.jpeg) Link: [https://youtu.be/PV1QP8cJh74?t=2305](https://youtu.be/PV1QP8cJh74?t=2305) Admitting at semi words that existing tokenomics are shitty lol. The network always overpaid for security. There’s no need for 1000 validators where clients only needs 20/30 cores. And i don’t even speak about the initial 2 digits yield for DOT staking 😵‍💫 . ---
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 17, 2026, 9:20pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/13 "2026-09-17T21:20:25Z")
Thanks for the link. In that case, however, we really ought to ask why a figure of $5,000 USD is being proposed. We all know that running a validator incurs almost no cost. Can, do we want to, and should we afford this selling pressure? ---
**Author:** ![ThomasR](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/thomasr/32/1227_2.png) [@ThomasR](https://forum.polkadot.network/u/ThomasR)\ **Post date:** [September 19, 2026, 12:56pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/14 "2026-09-19T12:56:54Z")
A question you should have asked before when the network was paying $500m/y to validators 🤷🏻‍♂️. Too many people were focusing on OpenGov spendings for nothing when the real issue was the cost of security Now it’s a bit late. Gav’s response was a bit late. - That’s why there are the recent changes with DAP stuff and dotUSD to try stopping the DOT bleeding. It’s a bit late but at least they are trying to do something. > [@The Roadmap for the Dynamic Allocation Pool (DAP)](https://forum.polkadot.network/t/the-roadmap-for-the-dynamic-allocation-pool-dap/16511): > > Introduction This post outlines a potential roadmap for implementing the Dynamic Allocation Pool (DAP) as an issuance buffer, together with the complementary changes required in the staking system. Given the scope of this initiative, we aim to structure the work into smaller, self-contained, and well-defined phases. The purpose of this post is to provide the community with a view of the broad picture as well as already presenting concrete details for the first phase, for which a dedicated WFC wi… Or > [@DAP staking changes significantly reduced Polkadot's security -- a wrong premise, and a bet against the industry](https://forum.polkadot.network/t/dap-staking-changes-significantly-reduced-polkadots-security-a-wrong-premise-and-a-bet-against-the-industry/18068): > > Summary The case for the Dynamic Allocation Pool (DAP) asks the Polkadot community to measure economic security by a lower bound – validator self-stake plus an annuity of forfeited future rewards, about 12.5M DOT today – instead of the nominator-inclusive slashable stake, which the write-up’s own accounting puts at ~285M DOT and our independent computation puts at ~224M today (§4.1), and to conclude that removing nominator slashing is therefore safe. This forum post reviews DAP, and we make thr… ---
**Author:** ![coco](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.polkadot.network/coco/32/1197_2.png) [@coco](https://forum.polkadot.network/u/coco)\ **Post date:** [September 19, 2026, 1:14pm UTC](https://forum.polkadot.network/t/incentives-for-compounding-staking-rewards/18632/15 "2026-09-19T13:14:21Z")
It’s a little late. Yes. As everything is a little late when it comes to Polkadot. Nevertheless DAP is to expensive and there might be room for corrections. Everybody check the facts: [https://x.com/cocokrypt/status/2100892170701996130](https://x.com/cocokrypt/status/2100892170701996130)